Have you ever been stopped at a shopping mall and been asked for your contact details — saying that it is for a lucky-draw? Well you will be contacted later and asked to come along with your family to claim your free gift – when you go there you realize there is a room full of people waiting there for their special gifts. It is a congregation of some unheard ‘International’ brand and how they want to acquire you into their work force, so that you can benefit in making some quick money by selling their unique product!
This company uses a business model called multi level marketing or MLM technique. It is a network based marketing scheme, where a person needs to join more people under him to earn incentives. There is a fee for joining the business, which will be compensated through the company’s product kit and membership enrollment.
How are MLM firms different from conventional businesses that offer similar products and services
When conventional companies employ professionals and distributors to sell their products through retail marketing and sales, you can only buy the product or service of an MLM firm through its members.
Why should we scrutinize them carefully?
The technique employed to introduce the concept of a new MLM business is always crooked. Never does the person, who approaches you– directly tell you about the business opportunity. It is introduced by an expert, to a group of new potential recruits at a meeting. The first impression always paves way for suspicion for the journey ahead.
Unattainable profits: These business models promise profits that cannot be attained by any other conventional business in the said tenure, neither can a financial expert explain its growth.
Not listed in stock market: Many of these so called multi-million dollar companies are not listed in any stock market around the world.
Not Certified: Precedents with most MLM businesses are not good and have turned out to be fraudulent. There is no sort of guarantee by the government for such schemes.
Appealing to the emotions: They play with the emotions of a person, making him believe that attaining financial security through short cuts is legit. The MLMs are giving people the greed of a richer tomorrow, which has made it hard for the government and experts to discourage people from joining such schemes.
Banned in most developed countries: Most developed countries have banned many of the MLM schemes introduced in India. These companies harbor in India by finding loopholes in the business laws and taking advantage of it. They generally operate out of Southeast Asian countries nowadays because of relaxed business laws.
Threat to social life: It has made social gatherings with friends or family members who are into this sort of business irritating, as they pressurize you to join them in their MLM scheme.
No investment in immovable property: Generally, such firms who make believe their business to be in tunes of millions and billions; do not have investment in immovable assets in the name of their companies. This leads to doubts as to in case of an eventuality, how is the company planning to pay off its members and liabilities.
Brain washing of members: The members are brain washed by mentors of the company and made to believe that hard work would reap huge profits with their business model. Even after giving in their best when the recruit does not receive desired profits, they are emotionally shattered along with the obvious — financial losses.
Improper business model: This model of business is not a legitimate direct selling method as the maximum commission got through a sale, travels from top of the pyramid to the bottom. That is, the top executives of the system benefits from the new recruit’s sale. MLMs do not have a fair ecosystem of earning where the effort you put in is directly proportional to your earnings. Hence, it cannot be a legitimate business.